If you’re like a lot of landscape businesses, pricing your mowing jobs may be a sore spot. There are quite a few factors that go into pricing — and most of them are going up. In fact, 66 percent of landscape professionals answering a recent Turf survey say they are raising mowing/maintenance prices this year. Of those raising prices, the average increase is 5.8 percent.
From rising labor wages to higher equipment costs, all of the signs seem to be pointing toward raising mowing prices, but it’s not always easy to do. “The problem with pricing jobs is that everyone is afraid,” says Dan Gordon, certified public accountant and managing member of TurfBooks. “Mostly, they’re afraid of losing business. So, even companies that are raising their prices often aren’t always doing it in a meaningful way. They’re really squeezing their profits because they’re afraid of raising prices too high.”
Of all of the factors that come into play with the decision to raise prices, Gordon says that labor is by far the most significant.
“Workers are looking for more money and the only way that you can afford that is to raise your prices,” Gordon says. “You have to bite the bullet and do it. When you sell your mowing jobs like a commodity and go a dollar cheaper than the ‘other guy,’ you’re eventually going to lose that job when someone comes along who is a dollar cheaper than you. But if you sell your mowing jobs like a premium service, where you truly take care of the customer — not only doing their mowing but performing other services as well — then you are creating value so that your customers, hopefully, won’t leave you over saving a few bucks.”
We reached out to three different landscape business owners in three tiers to determine how they’re pricing jobs. Interestingly, at all ends of the revenue spectrum, the contractors we spoke to did raise prices this year.
Small business: Fallen Leaf Lawn & Yard Care
Approximate revenue: $25,000
Bill Prout, owner of Fallen Leaf Lawn & Yard Care in East Haven, Connecticut, says that he raised prices this year even though he’s often competing with the mow-and-go guys that make it hard to raise prices in his marketplace. As a small operation, Prout says he does his best to keep equipment on the newer side so he creates some value against the lowballers out there.
In 2017, he bought a brand-new mower, and he plans to invest in additional equipment this year. Those buys always make it necessary for him to raise prices in order to remain profitable, and he’ll likely raise prices again this year.
“I have a base price that I will not go below,” Prout says.
“I see a lot of fly-by-night companies out there doing it. They drop prices just to get jobs. But that’s simply not sustainable, and you can’t give into the pressure to follow suit. It only hurts everyone when people do that. Those businesses rarely stick around long.”
Prout says he aims to build value with the other services that he offers such as seasonal cleanups, small install jobs, mulching and trimming.
“Convincing the customer that you have more to offer them than just mowing is important when you’re competing against rock-bottom mowing prices,” Prout says.
Medium business: Kinnucan Tree Experts & Landscape Co.
Approximate revenue: $5.5 million total for company
Bob Kinnucan, president of Kinnucan Tree Experts & Landscape Co., a full-service landscape company in Lake Bluff, Illinois, says they will be raising prices in their area due to the extreme labor shortage. As Kinnucan looks to pay his people more, and to deal with rising health insurance costs, raising prices is the only answer.
“We are currently looking at a 27 percent increase in our health care premiums,” Kinnucan says. “On top of that, we continue to uphold a belief in paying fairly for services.”
Kinnucan says that “predatory pricing” is a problem in the industry and that landscape business owners often fall into that trap. They don’t charge enough for what they do, and they don’t pay enough for the services their laborers provide.
“It’s destructive when we don’t value or charge enough for the services we provide,” he says. “Consequently, we don’t pay enough, either. In a lot of urban areas in this country, it is very difficult for a family to live on $40,000, and yet we are not paying a livable wage.”
Kinnucan says his company has always been on the higher end of the pricing spectrum in their marketplace and that trend will continue. Though he knows mowing has become heavily commoditized — “it’s all about how fast and cheap you can get it done” — he says he is committed to a higher standard.
“My philosophy has always been that if we can’t run the business the way I believe we should be running it, and charge what we need to charge to do that, then I’ll do something else,” Kinnucan says. “We have always had a high standard of service and have delivered on that. As a result, we will continue to be pricing leaders in our marketplace.”
Big business: Neave Group Outdoor Solutions
Approximate revenue: $3.5 million for mowing/maintenance and $12 million total for company
Neave Group does both commercial and residential mowing and raised prices in both segments in 2017. However, this year they will raise prices on the commercial side and hold on the residential side.
The hold is due to being able to raise prices significantly enough in 2017 that it will retain their profitability this year, says Jason Wegiel, director of services for the company, which is headquartered in Wappingers Falls, New York. Wegiel admits that setting prices can be challenging and always requires evaluating a number of factors.
“For us, insurance premiums are one of the most critical factors driving our pricing,” he says. “It’s a factor that must constantly be evaluated. On top of that, the cost of labor is rising as we see an increasing shortage of workers in our area. In a nutshell, there are fewer workers and they cost more to hire. We’re also seeing fuel take a jump in our area.”
With these costs rising, Wegiel says that raising prices was inevitable for the New York company, which is part of a larger umbrella group that does everything from design/build to pools and even specialty niches like sports courts. Having such a rounded service package has been an excellent way for the company to build value in their clients’ eyes. But that’s not to say they don’t also deal with lowballers. On the maintenance side, Wegiel says lowballers in their area are a definite problem.
“We see a lot of it,” he admits. “Unfortunately, we find that there are a lot of companies in our area that are cutting corners and lowering standards. It’s frustrating. But we do not compete against them. We do not lower our prices just because there are guys out there undercutting them. We ride out the storm.”
Although Wegiel says it’s a frustration, he says those fly-by-night companies do ultimately fail.
“It’s a shame because it does lower the perception of what services should cost and it reverses budgets — something that can take years to return to a fair market price,” he says. “But even so, we hold firm. We may lose a few jobs here and there to a company like that, but they ultimately do a poor job, lose the account and it comes back to us anyways.”